DOJ Advises Gibson Guitar to Export Labor to Madagascar

It seems that the Department of Justice wasn’t satisfied with merely raiding the law abiding factories of Gibson Guitar with armed agents, shutting down their operation costing them millions, and leaving the American company in the dark as to how to proceed without going out of business.

Now, according to CEO Henry Juszkiewicz, agents of the United States government are bluntly informing them that they’d be better off shipping their manufacturing labor overseas.

In an interview with KMJ AM’s “The Chris Daniel Show,” Juszkiewicz revealed some startling information.

CHRIS DANIEL: Mr. Juszkiewicz, did an agent of the US government suggest to you that your problems would go away if you used Madagascar labor instead of American labor?

CHRIS DANIEL: That your problems would go away if you used Madagascar labor instead of our labor?

So the government attacked them in the first place by citing obscure regulations that probably weren’t violated about importation of wood. Now they are suggesting that all these problems would go away if they simply exported their labor.

Had it simply been said in passing by an agent, one could write it off as a lone sarcastic agent, trying to push buttons. But the fact that they actually wrote it in the pleading is a level of hubris that goes well beyond over zealous law enforcement officials and passes straight into what can easily be translated as an out of control and corrupt targeting of an American corporation.

When President Obama gives his jobs speech next week, let’s hope he has an answer for why our government would want to force and coerce corporations to send jobs overseas.

And don’t all the guitar companies use the same woods for their fingerboards? So why the jihad against Gibson?

Like you, I've been a guitar geek for most of my life. I've been a collector for exactly forty years this year, and a very serious collector for over twenty-five.

The Madagascar ebony raid of 2009 is a different case than the 2011 East Indian rosewood raids of 2011.

I'll just address the East Indian rosewood.

I've said in many of my posts regard the East Indian rosewood fretboard blanks that I think the government's position is silly.

All of the large manufacturers, electric and acoustic, use some East Indian rosewood fretboards. Fender also uses maple; most manufacturers use East Indian on their lower-end guitars and NON-Madagascar ebony on their higher-end guitars. So . . . at first glance, the government's position on Gibson's East Indian rosewood fretboards is silly.

However, there are some other issues. They're going to sound picky, but what set of government regulations isn't picky?

First, there's a tiny chance that Gibson may have violated the law by importing wood that was pre-cut and planed to the approximate size of fretboards (and 10mm thick). India's Harmonized Tariff Schedule (online) clearly states that you can export veneer (under 6mm), finished wood products, and logs, but you can't export chipped, split, or cut wood over 6mm in thickness. Gibson - while Henry is singing about how he's saving American jobs and labor - saved money by not importing Indian rosewood logs and having the work done in the U.S. Now, I think the government's position is folly. My guess is that the Indian government has no idea what's in its HTS and that it exports rough fingerboard blanks for guitar manufacturers all the time. However, I don't know whether Fender and others do that. Fender may buy its blanks from an American company that imports the logs (legal under the Indian HTS) and makes the rough blanks.

Second, Gibson went through some 'creative' steps to acquire the East Indian Rosewood that triggered the raids.

Containers came into the customs port of Dallas by air.

There was no Lacey Act declaration on the containers.

None of the import or export paperwork on the containers had the name "Gibson" on them anywhere. In particular, Gibson was not listed as the 'ultimate consignee' on the paperwork.

On some of the paperwork, a small (10-17 employee privately owned) California company called Luthier Mercantile showed as the "ultimate consignee;' on other forms the 'ultimate consignee' was left blank.

However some of the paperwork had instructions to ship the containers interstate to an address in Nashville - an address that wasn't Gibson's - and to notify Luthier Mercantile in California.

The Fish and Wildlife people inspected the containers (and, no, I don't think you need a search warrant - it's like opening your suitcase when you come through customs) and found that one with paperwork that said it contained veneer under 6mm in thickness contained fingerboard blanks. They found that another with paperwork that said it contained finished wooded products for musical instruments contained rough-cut, unfinished, fingerboard blanks.

The Fish and Wildlife people contacted Luthier Mercantile to complete the Lacey Act paperwork and customs forms. The Luthier Mercantile representative arrived, did so, listed Gibson as the "ultimate consignee" on the Lacey Act paperwork, listed Gibson as the "ultimate consignee" on the blank paperwork, and upon questioning, admitted that Gibson was the ultimate consignee of the wood.

If you import something, you're the "importer of record." If you import wood for somebody, they are the "ultimate consignee."

The agents tracked the address in Nashville to which the wood was supposed to be shipped (supposed to be shipped initially to "ultimate consignee" Luthier Mercantile of California). Turns out it was a warehouse that didn't belong to Gibson. Inside, there was another shipment of Indian rosewood fingerboard blanks.

The second shipment had come from India to Canada, then entered the U.S. under paperwork showing Luthier Mercantile of California as the ultimate consignee, but with an address of the warehouse in Nashville. Upon questioning, the warehouse produced an email from Luthier Mercantile instructing the warehouse that, for customs purposes, Luthier Mercantile wasn't really the ultimate consignee - Gibson was.

There may be an innocent explanation for all of that, but it led to the government deciding that Gibson was trying to hide these shipments by leaving its name off of the export and import paperwork and using a proxy ultimate consignee.

That's when the feds got a warrant to raid Gibson's factories in Nashville and Memphis, and the warehouse.

Gibson doesn't ever mention the raid on the warehouse. I've wondered if that's because it opens up a whole can of worms regarding the use of a proxy ultimate consignee and export/import documents without Gibson's name on them.

Luthier Mercantile, by the way, has no employees in India. Gibson does. And Gibson retains a firm to handles its imports and exports. That's why it's odd that Gibson's nowhere on the paperwork.

I still think that the government was probably wrong on the East Indian rosewood raid - except maybe that Gibson engaged in a scheme to import that wood without putting Gibson on the paperwork, or except if other manufacturers are not buying fretboard blanks to save money, but are buying logs or buying their fretboard blanks from sources that bought logs and made the fretboard blanks.

The government seized computers and a flash drive in the latest raids. That may be key because some of the best evidence disclosed by the government in the Madagascar ebony case are Gibson emails regarding the legality of importing Madagascar ebony.

You should also note that Gibson's initial press release is careful to leave out the fact that civil "import contraband" charges were brought by the U.S. government against the Madagascar ebony more than a year ago. Gibson mentions its recent civil action, but leaves out the continuing government action that's more than a year old. Gibson also fails to mention that the civil action, which has been public, and has public documents, was sealed by the judge at the request of the government sometime after the government found out about the 'proxy ultimate consignee" stuff but before the raid. That means that new evidence and warrants filed by the government are sealed from Gibson in preparation of criminal charges. The old documents are still available.

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